Constellation Energy, EDF in nuclear joint venture

Deals

Reuters Staff

NEW YORK (Reuters) - Constellation Energy Group Inc. CEG.N will form a joint venture with French power group EDF EDF.PA to develop nuclear power plants in the United States and Canada, Constellation said on Friday.

“Their experience and capability will help us as we seek to undertake the steps precedent to making the decision for new nuclear development,” Michael Wallace, president of Constellation Energy Generation Group, told Reuters.

“They are also providing significant funding, as they are buying into the joint venture.”

EDF, the world’s largest nuclear operator, will invest up to $625 million in the venture, including an initial investment of $350 million. It plans to invest $175 million when the venture makes a regulatory filing for a construction and operating license at an existing Constellation nuclear site. The rest of the investment would be made based on pre-established

milestones.

After the $625 million has been expended, expected sometime in 2009, the two companies would begin investing equal amounts, according to Wallace. “At that point, we will be investing dollar for dollar in everything,” Wallace said.

Also as part of the deal, EDF may purchase up to 9.9 percent of Constellation’s outstanding common stock in the open market during the next five years, with a limit of 5 percent during the first 12 months of the agreement, Constellation said.

Constellation will contribute its interest in UniStar Nuclear, a joint venture with French nuclear engineering company AREVA CEPFi.PA formed to develop new nuclear units in the United States.

No new nuclear plants have been developed in nearly 30 years in the United States. Development came to a screeching halt following the Three Mile Island accident.

Recently, a number of power companies have announced plans to file for regulatory approval to build new nuclear reactors, including Constellation, which said it intends to make two construction and operating license regulatory filings next year.

In addition, Constellation will contribute the right to develop nuclear projects at one of its Maryland and two of its New York nuclear power plants.

Constellation and EDF will each own a 50 percent interest in a new holding company, UniStar Nuclear Energy LLC.

The transaction is subject to review by U.S. regulatory agencies, said Baltimore-based Constellation, which owns about 8,700 megawatts of generating capacity and a regulated utility in central Maryland.

Last year, Constellation and EDF agreed to work together to develop advanced nuclear reactors in the United States.